Results: Bank Policy

Welcome to my first fortnightly column on mortgage rate levels and prospects in New Zealand. At the start of 2022 we can see that all fixed interest rates have in fact risen quite firmly.

Borrowers could reasonably expect higher rates at their peaks, but not necessarily a faster speed of increase. Our central bank has an established long-term record of too often tightening monetary policy too slowly.

There's no reason for strongly believing that we face a future of sustained high inflation which will require an interest rate crunch. But borrowers should pay attention to the upside risks and the extreme uncertainty regarding how far and fast rates rise.

Banks lend out about $280 billion to households for housing purchases. But they have funding from households exactly equal to $200 billion. It might pay to stop and think about that number for a moment.